After a turbulent start to the year marked by shifting central bank signals, renewed geopolitical tensions, and disruptive tariff announcements from the Trump administration, fixed income markets are entering the second half of 2025 with cautious resilience.
While inflation is gradually falling in Europe, the US faces a more complex picture of slowing growth and potential policy missteps. From European sovereigns to emerging market debt, fixed income managers from across Generali Investments share where they’re finding value in a still-volatile landscape.
LDI View: A Global Steepening Trend Ahead
Global fixed income markets are expected to be shaped by trade negotiations, geopolitical risks, sovereign fiscal policies, and central bank action. The yield curve global steepening trend seen across major developed markets is expected to continue, although with bouts of profit-taking, driven by monetary policy shifts, economic growth, and supply-demand dynamics. While markets are pricing in about two rate cuts in both the US and Europe, long-term yields, particularly in the US, may rise further due to concerns over fiscal sustainability and increased bond issuance. The impact of the US tax cut plan, aligned with President Trump’s first-term agenda, could in fact add a significant amount to the deficit over the next decade. Japan’s long-end yield pressures and Europe’s upcoming defence and infrastructure spending, especially in Germany, will also likely contribute to this trend. In addition, in Europe, France’s 2026 budget could face challenges amid political fragmentation and tensions between the presidency and government, with the lack of parliamentary majority raising doubts about fiscal policy planning and sustainability.
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Supporting documents
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